Independence Air iClub - Indy Air to merge?

Interesting article on MarketWatch today. Seems one of DH's shareholders is pushing for them to find a merger partner. Any thoughts on who'd make a good match?

Here's the link to the article:

http://tinyurl.com/6hgjp

It's been largely talked about that Skywest, Republic, or Mesa are possible bidders.

Becoming a UA express carrier (at least in part) seems good, staying as they are is also good as they get more pax and recognition.

Their shareholders have been pushing them to do anything except what they are doing now. The shareholders can read the writing on the wall.

The only hope they have is finding a savior.

Well, HP has talked about merging with someone sometime soon. FlyI wouldn't cost much since they don't have many assets with everything being leased. HP could work with Mesa and send the CRJs to Mesa and keep the A319s.

(I am assuming that all the planes are compatible- engine wise).

Well, HP has talked about merging with someone sometime soon. FlyI wouldn't cost much since they don't have many assets with everything being leased. HP could work with Mesa and send the CRJs to Mesa and keep the A319s.

(I am assuming that all the planes are compatible- engine wise).

Whlinder, the only way that would happen is if FLYI first declared chapter 7, then voided the union contracts. I am certain the Independence Air pilots will not go to Mesa happily.

BBB

Hmm... I forgot about the love that FlyI has for Mesa... lol.

Whlinder, the only way that would happen is if FLYI first declared chapter 7, then voided the union contracts. I am certain the Independence Air pilots will not go to Mesa happily.

BBB
Hmm... TWA did a pre-packaged BK as part of their merger with AA. With Indy's current state, it probably wouldn't be too much of a stretch.

What if US and Indy merged? They could lock up the east coast market, especially DC. United could then start code sharing even more of the IAD flights and eventually back out of much of the domestic IAD market, leaving US/Indy as the feed and focussing on international flights... And everyone can start turning a profit.

... and people in D.C. can go back to paying 10 times as much for flights. Consolidation is just what we need.

I don't think the DOT would like one airline to control so much of the WAS market at both DCA and IAD. Remember the 'DC Air' spinoff that was to be the US Airways DCA operation when UA was buying UA?

It will stink to go back to the days of high fares but FlyI had quite an ambitious plan that they are finally starting to adjust to reflect the market reality. Whether they get it fixed in time remains to be seen. And I still think HP is the most likely partner, but perhaps F9 will be interested as well. Afterall, if your choice is Mesa or unemployment, which one do you pick?

"if your choice is Mesa or unemployment, which one do you pick?"

I think we answered that question during the hostile takeover attempt. I'll take the second.

With operating losses continuing to mount at both UA and US, and Indy having a year before they get hit with some of those deferments, I would be willing to lay some money that either UA or US will liquidate by the that time and Indy can pickup a couple of the pieces and grow a little larger on the long routes.

Who knows, could happen.

I don't think the DOT would like one airline to control so much of the WAS market at both DCA and IAD. Remember the 'DC Air' spinoff that was to be the US Airways DCA operation when UA was buying UA?

It will stink to go back to the days of high fares but FlyI had quite an ambitious plan that they are finally starting to adjust to reflect the market reality. Whether they get it fixed in time remains to be seen. And I still think HP is the most likely partner, but perhaps F9 will be interested as well. Afterall, if your choice is Mesa or unemployment, which one do you pick?
DC metro is already extensively served by multiple airlines, especially if you bring in BWI.
Hubs, you have UA and Indy at IAD, US at DCA, Southwest at BWI
And then focus cities, Airtran at BWI and JetBlue at IAD.
From Chicago, for instance, I can fly nonstop on Southwest, Indy, ATA, American, US and United to the DC airports.
If some of the current airlines went under, it wouldn't be much of a stretch for the others to beef up the operations - if that was even needed.

The way airlines keep holding on nowadays, I would expect to see either all three (US, US, Indy) go under, or none of them.

JetBlue at IAD.



While I appreciate JetBlues presence at IAD, moving from 4 destinations to 5 is hardly a boon to the locals.

As someone who lives in Northern VA - BWI is not a local airport. In fact the "southwest effect" had not impacted fares from IAD or DCA. Same with FL... - that leaves 2 airports, IAD and DCA. As for DCA, remember slots and limits on trip length (true, that is changing slowly) as well as the darn "you must remain seated for 30 minutes" rule... That leaves 1. IAD. And DH has helped a lot...

Hey.... Indy Air - maybe they will buy ATA and set up another hub in "Indy"???? :D

... and people in D.C. can go back to paying 10 times as much for flights. Consolidation is just what we need.


Can you please explain to me and the rest of us how the airline industry is suppose to survice without higher fares? Last time I checked just about every airline in existance (with the exception of Southworst) was losing money.

For those looking for even lower costs there is always Amtrak or Greyhound(they are both hemorrhaging money also)!

Lowering costs is the other option. However, it seems most airlines are intent on sucking the cost savings out of their employees instead of looking for greater effeciencies in operations. Look at the case of FlyI. One airbus holds about as many people as three RJs. The three RJs consume more fuel, require 4 additional flight crew, additional ground crew, as well as additional flight controllers, etc. By moving to larger planes, the airlines can save money - and reduce delays.

And smaller routes that cannot justify large planes? How about train service or bus service? It seems silly to fly planes less than 200 miles - where most of the fuel is consumed going up and back down. If its not an island, why not team with Amtrak or Greyhound to offer the connecting service?

Can you please explain to me and the rest of us how the airline industry is suppose to survice without higher fares? Last time I checked just about every airline in existance (with the exception of Southworst) was losing money.

For those looking for even lower costs there is always Amtrak or Greyhound(they are both hemorrhaging money also)!

Lowering costs is the other option. However, it seems most airlines are intent on sucking the cost savings out of their employees instead of looking for greater effeciencies in operations. Look at the case of FlyI. One airbus holds about as many people as three RJs. The three RJs consume more fuel, require 4 additional flight crew, additional ground crew, as well as additional flight controllers, etc. By moving to larger planes, the airlines can save money - and reduce delays.

And smaller routes that cannot justify large planes? How about train service or bus service? It seems silly to fly planes less than 200 miles - where most of the fuel is consumed going up and back down. If its not an island, why not team with Amtrak or Greyhound to offer the connecting service?



Lower costs only go so far. Aside from that you have ever rising fuel costs which almost neccesitate higher ticket prices.

Now the capacity issue; there is already a glut of capacity! FlyI can't even fill RJ's how are they going to fill more 319's?

I'm not going to argue with you, most of the legacy carriers have done a lousy job with asset utilization and could certainly squeeze more costs out of their overhead. The last couple of years they have been doing exactly that and the higher fuel costs and ever increasing capacity have negated most of their efforts.

Capacity has to be decreased and/or ticket prices have to rise, its simple ecopnomics.

Now the capacity issue; there is already a glut of capacity! FlyI can't even fill RJ's how are they going to fill more 319's?




FLYi, Inc. Reports March 2005 Traffic; 70.7% Load Factor

Not bad - though still hemoraging money....

Becoming a UA express carrier (at least in part) seems good, staying as they are is also good as they get more pax and recognition.They burned that bridge to become Independence. Formerly Atlantic Coast Airlines, they were the east coast feeder for both DL and UA.

Can you please explain to me and the rest of us how the airline industry is suppose to survice without higher fares? Last time I checked just about every airline in existance (with the exception of Southworst) was losing money.Perhaps someone should explain capitalism to the government. The fed, with good intention, has inflated the supply by propping up the weakest [major] carriers. If one would have been allowed to falter, the rest would be in better shape. I have never flown or worked under airline regulation, but I believe if the government is going to get involved they should regulate fares and wages as well.

Lower costs only go so far. Aside from that you have ever rising fuel costs which almost neccesitate higher ticket prices.

Now the capacity issue; there is already a glut of capacity! FlyI can't even fill RJ's how are they going to fill more 319's?

I'm not going to argue with you, most of the legacy carriers have done a lousy job with asset utilization and could certainly squeeze more costs out of their overhead. The last couple of years they have been doing exactly that and the higher fuel costs and ever increasing capacity have negated most of their efforts.

Capacity has to be decreased and/or ticket prices have to rise, its simple ecopnomics.
Southwest and Jetblue have been profitable. Neither of them fly RJs.
Reduction in capacity probably will not help out the airlines in their current state. Increases in fares will likely drive business to those that don't increase fares. I think a big mistake many airlines make is in trying to cut costs by cutting passenger amenities and employee wages. Some of the large scale innefeciencies may have a better impact on wage reductions. (If fuel is extremely expensive, it may make more sense to have planes fly less often.) Even if the same number of passengers ride a FLYI route, by switching from 3 RJs to 1 airbus, the financial position will likely improve.

FLYi, Inc. Reports March 2005 Traffic; 70.7% Load Factor

Not bad - though still hemoraging money....

Do we have any idea what their current break-even load factor might be now?

I would guess that it's gone up with the fare sales that have been out there. (Selling cheaper seats means you have to sell more of them to make equivalent revenue.) More interesting metrics are CASM (cost per available seat mile) and RASM (revenue per available seat mile). When those are equal, that's the break-even point.

Based on some very rough numbers (and they could be completely wrong) I ran from Q4, it looks like RASM was $0.09 and CASM $0.158 with a load factor of 53.2%. With those metrics and no increase in expenses but proportional increase in revenue of more people flying, a load factor of 76% would be break-even. (That roughly matches what an Independence exec was quoted as saying a while back.)

It's hard to say if that 76% is still accurate because we don't know if they're getting less, more, or the same amount of money per mile they fly a person. From Dec04 to Mar05 the ASM increased by 5%, but it will all matter how much was paid to fly all the planes so you won't really have a good idea until financials come out. Then you can calculate the new break-even load factor, and hopefully it won't be the 105% we saw a while back on some of the old mainline carriers that were selling seats below cost.

At any measure, 70% is much better than December's 55%, even if the average fare decreased, just to get that many additional people familiar with the brand. Hopefully revenue increased as well, and with only one month of one west coast flight running, Q2 should be even more interesting to add more west coast flights and the 319 service to CLT.

OK... may be a stupid question, but how do we know that they are selling below cost? Yes, I am pretty sure $49 is below cost, but every single seat is not discounted that much. If you check May 1st flights from IAD - MCO only 2 of the 4 Airbus flights are showing the $49 dollar fare and the other two are showing higher fares ($99 and $185)... which seems more reasonable from the viewpoint of making money. Are we sure they aren't selling say 10-20% of the seats at the "attention grabber" fare, and then selling the rest at normal fares which makes up the inbalance. From checking loads (especially on the weekends) the Airbuses are going out with very heavy loads... many are full... so if they sell 20 seats at $49 and then 112 at a spectrum of between $79 and $185 it could in theory even out the inbalance... right? (honest question).

Even if not, I agree with StSebastian... bumping up the load factor and getting people familiar with DH is crucial. DH offers a very good product, the problem is getting people to branch out and try it, but once they do they will be back.

It all depends what cost you are trying to measure. CASM, which is the cost to fly the seat, or the marginal cost of transporting a passenger? The two are different. CASM can change based on the route, but the CASM that airlines quote is just a total average of their system. Marginal cost is pretty tough to figure out and can also vary by passenger. A passenger who only brings a carry-on and buys their ticket on flyi.com and checks in online and flies nonstop has a much lower marginal cost than the passenger who buys a connecting ticket from Orbitz, checks a bag, calls the 800 number, and checks in with an agent. If Mr. $69 fare has their bags lost on their connection, Indy probably would have been better off not selling the ticket.

Most airlines sell tickets below 'cost' in terms of CASM, that is part of yield management. Hopefully they keep those tickets above the marginal cost of transporting an additional passenger. I personally think US Airways sells some tickets below marginal costs when they sell real cheap connecting flights through PHL, but that is just my guess based on their operational problems and their ticket prices. Hopefully Indy has a good handle on what the true marginal costs of them transporting another passenger.

I completely agree that from NoVa BWI is not a viable airport. They should make a code for only the NoVa airports. I hate looking up flights using WAS and getting flights from BWI that I can't possibly catch.

Can you please explain to me and the rest of us how the airline industry is suppose to survice without higher fares? Last time I checked just about every airline in existance (with the exception of Southworst) was losing money.

Last time that I checked AirTran and JetBlue were still profitable operations. I am sure that there a few others here and there, but they are probably regional carriers or much smaller operations.

I would guess that it's gone up with the fare sales that have been out there. (Selling cheaper seats means you have to sell more of them to make equivalent revenue.) More interesting metrics are CASM (cost per available seat mile) and RASM (revenue per available seat mile). When those are equal, that's the break-even point.



I don't know what everyone else is paying on their weekly round trips but I am paying 5% more than I did 2 months ago and 20% more than I did back in October.

Plus the flights that I want are getting harder to grab the cheap seats on during sales so I am having to book flights farther in advance than I used to.

Across the board I'm seeing higher fares than I was over the past few years, but you can still get the good deals when sales pop up ($64 to Vegas from RDU).

For the financial aspect I was just going to ignore marginal cost for that discussion...just getting the RASM closer to CASM means they're paying out less cash to continue operations. I'm sure an accountant could get into a whole lot more detail on ways to analyze the information. :)